The Consumer Financial Protection Bureau said funds stored on digital payment apps may not be safe in the event of financial distress and advised consumers to transfer their balances to insured financial institutions.
Fund Protections: In an analysis and consumer advisory, the CFPB noted that unlike traditional bank accounts, nonbank payment apps such as PayPal and Venmo lack deposit insurance, so funds stored on these services are not similarly protected.
Consumer Risks: The CFPB also said:
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More than three quarters of adults in the United States have used a payment app.
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Nonbanks hold and invest the funds stored on their platforms, which carry risks for consumers in case of failure.
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User agreements often lack information, including on what would happen if the entity holding the funds were to fail.
ICBA View: Among its comments in an April letter to the FDIC, ICBA said regulators should pay close attention to:
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Offerings that blur the lines between guaranteed bank deposits and nonbank deposit products.
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Entities that misrepresent the presence of deposit insurance on products offered by a bank’s third-party partner with deposits held by the bank.